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TMI Blog2010 (3) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... ply agreement are self-explanatory. Pursuant to the said terms of supply agreement, the petitioner-company installed and erected cryogenic air separation plant/s at the plant of the respondent-company. As the respondent-company defaulted in clearing the outstanding dues for the supplies made, the petitioner-company filed O. S. No. 132 of 2006 on the file of the Second Additional Chief Judge, City Civil Court, Hyderabad, on April 19, 2006, for recovery of money. The petitioner-company secured certain interim orders and thereupon, the respondent-company filed C. R. P. No. 6582 of 2006 aggrieved by an order dated September 15, 2006, passed in I. A. No. 2824 of 2006 being an application filed under section 8(1) of the Arbitration and Conciliation Act, 1996, seeking reference to the arbitrator to resolve the disputes between the parties arising in the suit. Ultimately, the respondent-company paid a sum of Rs. 9,11,00,000 as full and final settlement of the dues and accordingly, the suit filed by the petitioner-company against the respondent-company ended in dismissal of the suit as withdrawn. A memorandum of understanding, dated January 15, 2008, came to be entered into between the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Existence of the supply agreement and filing of O. S. No. 132 of 2006 on the file of the Second Additional Chief Judge, City Civil Court, Hyderabad, and subsequent dismissal of the suit as withdrawn are not disputed. The respondent-company disputed its liability to pay the basic facility charges for the shut down period. It is also stated in the counter-affidavit that the arbitration application filed by the petitioner-company ended in dismissal and thereupon, the petitioner-company filed an appeal being Appeal No. 198 of 2009, wherein a consent order came to be passed appointing the sole arbitrator, namely, Sri Justice B. N. Srikrishna on March 26, 2009. Thereafter, the petitioner-company filed a claim statement before the arbitrator on September 18, 2009, claiming an amount of Rs. 7,28,33,965 with future interest along with other reliefs. The said amount is inclusive of the basic facility charges under the supply agreement and/or modification agreement from October 1, 2008 to August 31, 2009, with interest. The said liability is denied by the respondent-company before the sole arbitrator. Paragraph 6 of the counter-affidavit needs to be noted and it is thus : "In reply to par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments from the respondent-company for the shut down period also in accordance with clause 5.2 of the supply agreement, which was reconfirmed in the modification agreement. As the respondent-company has not cleared the pending bills, the petitioner-company was constrained to suspend supply of gases to the respondent-company as specifically provided under clause 10.7 of the supply agreement read with clause 11 of the modification agreement. It is further stated in the reply affidavit that the e-mail correspondence between the parties speaks of the demand of the petitioner-company to clear the outstanding payments from October, 2008 to enable it to restart the plant. 6. Heard learned counsel appearing for the petitioner-company and learned counsel appearing for the respondent-company. 7. Learned counsel appearing for the petitioner submits that as per the supply agreement dated September 4, 2003 and modification agreement dated September 1, 2008, the respondent-company is bound to pay the basic facility charges and since the said charges are not paid, the same came to be accumulated to a tune of Rs. 3,91,69,885 and thereupon, a statutory notice came to be issued to the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions that prevailed." 9. In support of his submissions, reliance has been placed on the decisions in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1971] 3 SCC 632; [1972] 42 Comp. Cas. 125 , Haryana Telecom Ltd. v. Sterlite Industries ( India) Ltd. [1999] 97 Comp. Cas. 683 ; [1999] 5 SCC 688, Resham Singh and Co. (P.) Ltd. v. Daewoo Motors India Ltd. [2003] 116 Comp Cas 529 (Delhi) and Ritika (P.) Ltd. v. Omaxe Construction Ltd. [2010] 153 Comp Cas 573 (Delhi). 10. In Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1971] 3 SCC 632 ; [1972] 42 Comp. Cas. 125 , the Supreme Court held that where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. 11. In Resham Singh and Co. (P.) Ltd. [2003] 116 Comp. Cas. 529 , it has been held by the Delhi High Court that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of applying the deeming provision should not automatically arise. I continue to be in respectful agreement with this view. Applying this ratio to the facts of the present case, without in any manner diluting or undermining the significance of the failure of the respondent-company to respond to the statutory notice, this factor will be duly kept in perspective when the conspectus of facts is considered." 12. In Ritika (P.) Ltd. v. Omaxe Construction Ltd. [2010] 153 Comp Cas 573 , it has been held by the Delhi High Court that the remedy of arbitration is not an alternative to the initiation of winding up proceedings. 13. Learned counsel appearing for the respondent contends that payment of basic facility charges for shut down period is a dispute before the sole arbitrator, and therefore, no adjudication can be taken up in summary procedure which the company court must follow. She would further submit that the petitioner-company put a claim in respect of the basic facility charge before the sole arbitrator and thereupon, the respondent-company disputed its liability to pay the basic facility charge for the shut down period and the said issue is yet to be adjudicated by the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents have commenced Capex Programme as a part of the backward and forward integration process. This Capex Programme would take approximately 18 more months and the plant would remain shut for the said period. (t) In the meantime, the claimants have initiated the proceedings against the respondents. However, the respondents in good faith and in a proper business like manner, in order to avoid commercial hardship and losses to both the parties have been carrying out negotiations with the claimant. The respondents are doing so despite the force majeure condition which have arisen as stated hereinabove and despite the respondents suffering losses on account of the claimants conduct. 5. In the aforesaid circumstances it is submitted that the application for interim reliefs to be rejected. The default has been committed by the claimants and the claimants cannot take advantage of their own wrong. It is the claimants who have on one hand refused to supply gases (whilst the same was required) and on the other hand are claiming that the respondents should not take gases from third parties (even though the gases which were taken were of very limited quantity only for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the court to reject the petition, relegating parties to the civil court. Where a bona fide dispute has been shown to the court, the question of applying deeming provision should not automatically arise. 17. Indisputably, an arbitrator came to be appointed on a joint memo filed by the parties in Appeal No. 198 of 2009 in Arbitration Petition No. 170 of 2009 on the file of High Court of Judicature at Bombay. A copy of the order has been annexed to the counter filed by the respondent-company. Paragraph 8 of the relevant portion of the order passed in Appeal No. 198 of 2009, needs to be noted and it is thus : "... it would be appropriate to permit either of the parties to apply to the sole arbitrator for any interim relief as they deem fit and to order that while considering such a prayer the learned arbitrator would not bound by the impugned order. The parties may also be at liberty to raise all contentions before the sole arbitrator in addition to those raised before the learned single judge." 18. The petitioner-company submitted a statement of claim before the sole arbitrator. The petitioner-company claimed basic facility charge for the shut down period of the respondent-c ..... 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